Bank Regulatory Burden Evaluation Tool

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Bankers must spend too much time and commit too many resources to regulatory compliance, leaving too little time and resources for providing actual bank services. Much of the effort does not support bank soundness and has little or no benefit to customers or investors.

Every banker knows that compliance with the growing set of regulations, as well as adjusting to changes in regulations, takes hours out of the business day and has become a major expense. Many bankers have asked for a means to measure the growing regulatory compliance burden. They feel that valuing the time and cost would help with internal planning, and they would use the data to speak to their regulators and legislators.

ABA has developed an evaluation tool to help bankers measure their regulatory compliance time and cost. The tool asks for estimates of representatives from central management, lending and deposit taking to input of the approximate hours spent on dealing with regulations and the hourly wages of the staffers who do the work. (You input data in the yellow spaces on the "Input" page, but note that you will leave most yellow spaces blank.) The input data is for one specific month and is identified by specific regulations. Once completed, the hours and wages for those hours are automatically totaled on the "Results" page to estimate the regulatory burden in that month, and the impact on profitability.

Please beware. As one bank CEO put it after checking the total, "That's a scary sum!"

The evaluation tool is provided as an Excel spreadsheet that automatically sums your estimates of time spent and wages paid.

ABA would also like to get a measure of banks' regulatory compliance costs. We have explained to federal regulators and legislators that the cost has become a major burden for all banks, so much so that it is impeding banks' ability to conduct business and serve their customers. We need hard data to prove our point. We would like to collect the estimates from as many banks as possible to compile an estimate of the regulatory burden for the entire banking industry. Therefore, we request that you e-mail your "Results" to rstrand@aba.com or fax them to 202-828-4547. Your data will be entered in our databank then destroyed; it will be kept strictly confidential.

​Tool Instructions

This evaluation tool is intended to provide an estimate of the staff hours and cost that your banking firm devotes to compliance with regulations over a month's time, so that an estimate of the annual burden can be calculated.

Once you have loaded the tool, you should save it on your computer. The tool is an Excel spreadsheet in four forms, three for input data and the other calculates results. The data entry pages were not provided as paper sheets because the data must be entered into the spreadsheet so that it can perform its automatic calculations of your bank's total regulatory burden. Data is to be entered only on the "General Mgmt," "Lending" and "Deposit Taking" forms, in the yellow spaces. However, you probably will not fill in most of the yellow space, as described below. All four forms are set up to be printed, to make it easier for you to compile draft figures.

In the center of the top line of the "General Mgmt" form, enter the first day of the month that the estimates apply to. The format is month/day/year. For example, if you are filling out the form for September 2005 then enter 9/1/2005. Also enter your bank's name in the top right corner.

Six more bits of background data are needed in the next two lines: 1. the approximate assets of your banking organization in millions of dollars, 2. the total number of branches including headquarters, 3. the number of business days in the month under review, and, only if your bank's shares are publicly traded, the numbers of shareholders and shares outstanding, and 4. the approximate current market price.

The Input section includes three pages for general management regulations, lending regulations and deposit-taking regulations. Each section can be parceled out to the bank staffer who is best suited to estimate the values required.

Each of the three forms contains a list of specific regulations that impose time demands on the bank. The form asks for estimates of the hours spent and wage rate for the staffer who does the work for a set of tasks of each regulation. You should adjust the wage rate upward to account for benefits. For functions performed by more than one employee, approximate the average hourly cost of those that do the task. On the "General Mgmt" form, you can estimate direct dollar compliance costs other than staff-time, for non-staff consultants, attorneys, training, mailings, and other technical support. Space is also provided for other specific tasks that are not listed. Here you can add the regulatory burdens that are specific to your states, which were not included in the generic input forms.

Note that the tool focuses on the regulatory burden specific to banks. A small section is included for general regulations that apply to most firms, bank and others, so that the major costs of the Sarbanes-Oxley Act can be captured. The forms do not include many of the burdensome, non-bank-specific regulations, such as those from the Occupational Safety and Health Administration and Americans with Disabilities Act. The major expenses of accounting and auditing were also not included by similar reasoning.

Each line asks for an estimate of the hours spent in direct compliance actions directly, per branch, and/or per department other than compliance. You can allocate your bank's commitment in whichever column(s) work best for you; you do not have to enter something in every column. You can estimate time weekly or for the entire month. For example, suppose that you see the bank's compliance time for a particular task as an hour a week plus 6 hours a month. Then you would enter 1 under "Weekly" and 6 under "Monthly." If you enter a time estimate for any task then you must also enter a value under "Av. Hourly Wage ($)" for the computations to work. Similarly, if the time commitment is per branch or per department then you must also enter the number of branches/departments in the space provided.

Once you fill in the month, hours, wages and direct costs that are relevant to your institution, the tool will automatically calculate the total time and expense for the month on the "Results" form. The calculations will also estimate the annual total. If the month reported on is above or below the normal monthly average for a particular activity, you can adjust the data entered to the normal level to get a closer estimate of the actual annual burden.

ABA requests that you e-mail your Results to Rob Strand or fax them to 202-828-4547 so that an estimate of the regulatory burden for the entire banking industry can be compiled. Your data will be entered in our databank then destroyed; it will be kept strictly confidential.